Monday, November 13, 2017

SCREWED: Senate Version of Tax Plan Has Special Tax for Silicon Valley Techies

Many Silicon Valley techies are partially compensated with stock options and RSUs.

Currently, stock options are taxed upon exercise and RSUs are taxed upon release of the underlying shares.

The current draft of the Senate Tax Reform Bill would tax stock options and RSUs upon vesting.

Fred Wilson, a VC and principal of Union Square Ventures, explains:

What this would mean is every month, when your equity compensation vests a little bit, you will owe taxes on it even though you can’t do anything with that equity compensation.

You can’t spend it, you can’t save it, you can’t invest it. Because you don’t have it yet.

This tax will, of course, impact any firm that issues stock options or RSUs but this type of compensation is prevalent in Silicon Valley.

Notes Wilson:

If this provision becomes law, startup and growth tech companies will not be able to offer equity compensation to their employees. We will see equity compensation replaced with cash compensation and the ability to share in the wealth creation at your employer will be taken away. This has profound implications for those who work in tech companies and equally profound implications for the competitiveness of the US tech sector.